The ‘backstop to the backstop’ on future customs arrangements

Posted in UK and EU legal framework WTO and international trade

The UK Government continues to explore with the EU how it can avoid a hard border between Ireland and Northern Ireland while remaining outside of the Customs Union post-Brexit.

The Government’s position, since the Prime Minister’s speech at Lancaster House, is that the UK would not remain within the Customs Union following Brexit as this would restrict its ability to pursue an independent trade policy. However, aside from the fact that this approach makes it more difficult to achieve frictionless trade between the UK and the EU post-Brexit, it also gives rise to the inevitable problem of how to avoid a hard border with Ireland, an outcome to which both sides have been committed.

In December 2017, the Government confirmed in the Joint Statement issued by the UK and EU that, in the absence of any other agreement between the EU and the UK, it will maintain “full alignment with those rules of the Internal Market and the Customs Union which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 [Good Friday] Agreement.”

Subsequently, the EU’s draft withdrawal treaty, proposed a "common regulatory area" between Ireland and Northern Ireland. Under this proposal, there would be free movement of goods between Northern Ireland and Ireland and Northern Ireland would be subject to EU customs rules. The upshot of this would effectively be to bring Northern Ireland within the Customs Union, thus transferring the real border between the UK and the EU to that between Northern Ireland and the rest of the UK. This was immediately rejected by Theresa May, on the basis that it would "threaten the constitutional integrity of the UK" – a stance she has subsequently repeated on a number of occasions.

In response the EU maintained that this initial proposal was a back-stop option and invited the UK to come out with an alternative.

It is worth noting that the ‘backstop’ option is only intended to apply in the event that no other agreement is reached between the parties regarding future customs arrangements. The UK’s most recent proposal is for a 'facilitated customs arrangement', although this has not been accepted by the EU.

In June 2018, the Government published its proposal for a ‘backstop’ option regarding temporary future customs arrangements between the EU and the UK. Under this plan, the UK would have effectively remained within the Customs Union beyond the expiry of the transition period at the end of 2020. However, such arrangements were to be time limited and would “be only in place until the future customs arrangement can be introduced”. The UK’s expectation was that such future arrangements would “be in place by the end of December 2021 at the latest”. However, if no agreement has been reached by that time, it would seem to follow that the ‘backstop’ arrangement would remain in place.

To date, no agreement has been reached and the EU has generally been hostile to the concept of a time-limited backstop. According to the Prime Minster in a statement to Parliament on 15 October 2018, as negotiations have progressed, the UK has brought forward further proposals and the EU has agreed “to explore a UK-wide customs solution” to the backstop. However, from the EU’s perspective, the difficulty is that there is now not sufficient time to negotiate the detail for a UK-wide solution. In the Prime Minister’s words: “[t]he EU still requires a ‘backstop to the backstop’ – effectively an insurance policy for the insurance policy. And they want this to be the Northern Ireland-only solution that they had previously proposed.” Further, from the Government’s perspective, there remains a desire to ensure that any backstop is time limited.

Despite the apparent impasse, the Prime Minister reiterated that the Government remains committed to reaching agreement with the EU. Whether such agreement can be achieved and whether it would be approved by Parliament remains unclear. It is likely that the next few weeks will provide answers to these questions and in particular, whether an agreement will be reached as to the terms of the UK’s departure from the EU.

Brexit: planning for the future as negotiations continue

We have created this Brexit blog to provide up to date analysis and legal commentary as the new Brexit landscape evolves, addressing key questions and topics of interest to our clients across the different industry sectors in which they operate.

For Brexit Q&As tailored to your industry and more insights visit our Beyond Brexit webpages.

Blog Network